This Week In College Viability (TWICV) for July 1, 2024

Gary (00:01.461)
It is July 1st. I trust that while I record this podcast, we'll not hear very many fireworks firing off outside the Stocker office window. Hey, it's Gary Stocker. Welcome back again for another episode, another podcast episode of This Week in College Viability. And the stories we're looking at, of course, we always lead off with layoffs, cutbacks, and closures. We have a few of those this week. A couple of more FAFSA debacle reports. I think I need to patent that name, FAFSA debacle.

Bradley University, I'm gonna give them a new award. I'm gonna give them the College Viability Star for being forthright and honest. Now this is the leadership at Bradley University. Its faculty does not get to share the award. I'll tell you why in a few minutes. And then why so many colleges are closing now and what it means for students. Now a personal note on this one, this is a Wall Street Journal Market Watch story that quoted me extensively. I am grateful always to be able to talk to reporters.

and offer them a perspective and some guidance on where this very difficult market is headed. Layoffs and cutbacks. The first one is a cutoff, is a layoff, excuse me. The first one is a closure. And this is Eastern Nazarene College in Massachusetts. And this story was reported by Frank O 'Loughlin and the Boston 25 news staff. It has gotten a lot of publicity since it came out last week. One a week, that's what we're seeing. And even I bet this 4th of July week.

I bet we still see our one closure announcement coming out. The next one, the SUNY, Rockland. Board of directors, they plan to slash up to 2 .6 million in jobs to address an ongoing multimillion dollar deficit. I doubt the 2 .6 million makes a big dent, but they're gonna try and do it anyway. That comes from the Rockland News on June 26th. Keystone College has been on the podcast a few times before, and they announced on June 21st, excuse me, June 25th.

that they are cutting 29 faculty and staff position and closing just three low enrollment programs. That seems low. And this comes from Jim Lockwood on the 25th of June at the Times Tribune. UNC, University of North Carolina, Charlotte, University of North Carolina Asheville, excuse me, to cut under enrolled programs. And no details on this, when they're going to cut some programs with low enrollment. But I do want to note that whether you're looking at public or private colleges,

Gary (02:26.101)
make sure you go to your college navigator and look at the majors, look at the programs and majors, and how many students have graduated from the major or majors that your student is considering. I think I'm gonna do a YouTube video on that shortly to show you how to do it. But if your student is a journalism major, for example, and you're looking at one college that has five journalism majors, graduated over the last few years, and one that has 55, 105.

Be really careful, whether it's a public or private college, in choosing a college that has a really low enrollment or under enrolled programs, to use that term at UC UNC Asheville, they may be a risk for closing. Page two, the FAFSA fiasco forces cuts at small colleges. And I think I talked about this a little bit last week. Many small private colleges are

Surviving quarter to quarter, I think that's term to term. Narrowly avoiding sweeping budget cuts. Well, okay, I'm not sure that's the case. The bungled FAFSA rollout pushed some over the edge. And this is a story from Inside Higher Education. And Liam Knox is the one that wrote that, wrote the story.

And really, this is kind of like I talked about a little bit last week. This is a story about a handful of colleges proactively cutting expenses in anticipation of the FAFSA debacle being real, and it will be. And mark my word, mark my word, that those colleges, those colleges who are not preparing for the FAFSA debacle with financial adjustments, cutbacks, if they're not doing it now, they will become the colleges this fall.

facing a financial and public relations debacle of their own as this fall rolls on in my bed and we start seeing that in October, November, December sometime, and it rolls into early in 2025. Again, like I've said so many times, there are just too many colleges and not enough students willing to pay even a heavily discounted tuition. There are no programmatic changes. There are no marketing tactics that will change that economic.

Gary (04:41.557)
Reality page two. We had a bad year, is the headline. This is from WCBU 89 .9 FM in Peoria, Illinois. And if I give out awards for reporters, maybe I should, Tim Shelley wrote a great story here. And this is what I talked about before. The Bradley University administration, particularly I think it's their CFO, really upfront. And let's talk about the story. It's a big deal. And again, kudos to Tim Shelley at WCBU. This is a well -researched and well -written story and of course, compliments.

to Bradley University for sharing their situation with this. This is a story about bonds, loans that colleges take out, and the rules associated with borrowing that money, the bonds. Those rules are called covenants. Bradley University, Bradley University broke a covenant associated with a financial ratio, and that's not important to the story from our perspective, but they broke a covenant associated with a financial ratio set by the bondholders.

folks that lent Bradley money. Again, I'm not sharing the number. I don't have it in my notes here, but that's not important. They broke the covenant. They broke the rule. Matt Fabian, who was quoted in the story, he's a partner at Municipal Market Analytics in Concord, Massachusetts, notes why covenant violation, which Bradley did, isn't considered to be as serious as missing a payment. Fabian said it's still a red flag.

It's not a payment default, but it is a technical default, Fabian adds. And universities in strong financial health just don't have technical defaults, Mr. Fabian said. So there's clearly challenges that the school, Bradley University, is working through in this case. Now, the story's about Bradley. Again, kudos to them. They could have buried this and spun this many ways, and they didn't. And Tim Shelley just...

I hope I can reach out to Tim Shelley and see if he'll join me on the podcast someday. But here's where the real story is. It's not Bradley University's honesty. It's not even Tim Shelley's excellent reporting. There are countless colleges that have almost certainly violated some or many bond covenants on loans they have with bondholders. And there is a smaller number that are not even making payments on those bonds.

Gary (07:08.917)
And in many cases, those colleges are the ones that are announcing their closure. And I think we'll continue to see this.

Gary (07:18.229)
I've talked about this before, but if higher education bondholders decide to start calling in the entire amount of bonds due immediately because of those broken covenants, and there are many, we will see a rush of college closures, even in excess of what the FAFSA debacle is going to cause here in the coming months. And there's another part of the story. I'm going to go back to the faculty piece I mentioned in the start of the podcast.

There's another part of the story that is disconcerting, but not really surprising. And I'm going to read from Mr. Shelley's story. And I quote, the Bradley chapter of the American Association of University Professors argue the cuts made at the university hurt the university's academic standing. Apparently they've retained legal counsel regarding cost cutting process, saying it violated their faculty handbook. I don't doubt that's a distinct possibility. So here's what Bradley did.

They terminated 38 faculty jobs and another 23 were cut through attrition for a total of 61 positions. 15 programs will be phased out and another five will be demoted from majors or concentrations to classes in the core curriculum. Here's the tough part in the face of what is clearly, clearly a higher education bear market, declining market, college, faculty, Bradley University.

can't even see beyond the wall of their ivory covered buildings, I don't know if they have towers, at the need for financial and academic concessions for the good, for the financial good, for the financial health of the university. Not good, not good. Page three. This is a story that I was quoted on. It's why so many colleges are closing now and what it means for students. This is Maya Levine. She and I chatted in mid -June sometime.

and it's a Wall Street Journal publication, Morningstar. I think I said Market Watch, that's another one. And from my perspective, you know you're making an impact, I'm pleased, when the Wall Street Journal and Market Watch division of the Wall Street Journal interview you. And the article though is yet another example of a large media outlet jumping on the college closure story.

Gary (09:40.981)
The story itself is kind of a foregone conclusion story. And the first one I'll tell you why. The first line reads, closures are always disruptive, but there are strategies schools can employ to minimize the challenges students face. They're not even, Market Watch and the Wall Street Journal reporter are not even questioning that colleges will close. They're saying, hey, there's a good way to do it, to minimize the challenges that students face, and of course, faculty and staff face challenges as well.

One of the sources quoted in the story made note of the fact that as a percentage, the number of colleges closing is small. And I won't argue that obvious point. What I will suggest goes beyond the obvious, and that is with this continuous drumbeat of stories about college closures and actual college closures, we're going to hit a tipping point. And maybe that's already happened.

Think about this in the context of that tipping point. And it will be when students and families shy away in larger numbers from private colleges in general with that general fear of the financial health of private colleges. Because almost every college closure story is about a private nonprofit college. And I don't even lump them into religious and regional. I would argue the case that they're essentially the same thing.

although others won't agree with me on that. And this is why the college viability app is so important. There are many, many, many financially healthy private colleges and the app shows who they are. It's kind of, as I've shared before, the college viability app, the 2024 version is kind of the reverse FAFSA, kind of the reverse FAFSA for students and their families. Of course we know that the FAFSA,

form that you fill out as parents and students, lets colleges know your financial situation. And the college viability app kind of is only the, is the tool that lets you look at the financial health of the colleges you're considering. That's only fair. If they're looking at your financial health, you should be able to look at their financial health. And of course, I'll give you a link, not just to the stories.

Gary (12:06.292)
but how to acquire the 2024 student and family version of the college viability app. And I have both private and public college versions. Page four, gosh, another FAFSA debacle story, another nail in the coffin for vulnerable colleges. And it's really issues with the forms rollout have made identifying merger partners for many colleges an even greater urgency.

even greater urgency is needed. And as I've shared before and others have shared, most of these private colleges closing way too long to start looking for merger partners, consolidation partners, whatever term you want to use. And this was a story in higher education, HED, higher education.

This article called Merge Watch is one that Ricardo Aziz does once a month, I think. This one was published on June 28th, higher education dive, just came back to me. And Ricardo Aziz, for those that don't know, has held numerous executive positions in higher education. He's the principal at strategic partnerships in higher education, also called SPH as a consulting group. Here's what he writes. In SPH is the consulting group's own analysis using federal data from 2022.

we observed that the smaller the institution, the greater the proportion of full -time, first -time undergraduates that were awarded Pell Grants. Of course, those are federal grants. On average, the quote continues, Pell Grant recipients made up 61 % in change, 61 % of students at colleges with fewer than 1 ,000 students, compared to only 35 % in change for institutions with enrollment exceeding 20.

thousand students. Consequently, Dr. Aziz argues that the impact of the FAFSA rollout, the FAFSA debacle, is hurting the smallest schools the most. No question. And thus we have yet another reason that the fall 2024 FAFSA debacle is coming to a college near you. I still believe, I still believe that we will see a marked increase in private college closures

Gary (14:30.773)
especially smaller ones, especially rural ones this fall. But that's only part of the story. Many, many colleges who don't have to close financially will continue to struggle along without the financial resources, yet financial health needed to provide the college education their students deserve and need.

And I'll wrap this up with going back to my college manifesto, the first three bullet points. The college manifesto, excuse me, the college viability manifesto. College number one, college is a really good thing. Go if you want, and if you can.

Number two, graduating is better than just taking courses. Keep that in mind when you're deciding to go or not. And some colleges, an increasing number of colleges will close, but many, many, many will not. And as your higher education quality control resource, self -proclaimed, I make every effort to provide listeners with a different perspective on college finances, on even college operations.

than the self -serving spin almost all colleges engage in. And there's nothing wrong with spin, we all do it. But the college decision is a life changer, for better or for worse. And the data is there to show you which colleges are in trouble and which are probably not in trouble. Use it, don't use it. The choice is yours.

Until Monday, July 8th when I'll be back with the next episode of This Week in College Viability. My name is Gary Stocker. As always, thanks for making time to listen to the podcast. Let's do it again next week.